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Buckets of Money

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What is “Buckets of Money”? A conservative growth oriented strategy that hopefully will allow you to: Live comfortably Sleep well at night knowing you will never run out of money

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The Buckets of Money objective To avoid running out of money before you run out of time

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Advantages of Buckets of Money Safe - no investment risk – only guarantees Simplicity Proven Tames the twin demons – taxes and inflation Flexible – modify Buckets program as your situation changes Probate free transfer to your beneficiaries Private Purposeful

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How it works... Bucket # 1Bucket # 2 Bucket # 3 Each Bucket is invested in a different way

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Bucket #1 Safe - low growth vehicle Consistent, guaranteed tax favored income Principal and interest will be depleted over a number of years Meanwhile bucket #2 is growing...

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Bucket #2 More safe income and an inflation hedge But a better return After Bucket #1 is empty, you pour money from Bucket #2 into Bucket #1 for yet another specified period of years

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Bucket #3 Long term growth After Bucket #1 is empty, you pour money from Bucket #3 into Bucket #1 for yet another specified period of years Typically Bucket #3 will not be used for 14 to 16 years

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A Quick Review Bucket #1 Short Term Income for 7-8 Years Pour into Bucket #1 When empty. More income with inflation hedge Long term growth 14-16 years Bucket #2 Intermediate Bucket #3 Long Term

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Step 1 – How much to put into bucket #1? Desired Monthly Income? Multiply x 12 7 Year Factor = 6.45 Example Income $10,000 per month $120,000 per year $120,000 x 6.45 = $774,000

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Step 2 – How much to put into bucket #2? Current annual income needs Multiply by inflation rate factor 3%1.229 4%1.3159 5%1.4071 Multiply this number by 6.45 = Funds needed for Bucket #2

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Step 2 – How much to put into bucket #2? Example – income $120,000 X 4% inflation factor (1.3159) = $157,908 bucket #2 income $157,908 x 6.45 = $1,018,506 $800,000 in bucket #2 earning 3.5% will grow to $1,018,506 in 7 years

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Step 3 – How much to put into bucket #3? Funds not allocated to Buckets #1 or #2 go into Bucket #3 You’ll be 14 years older Bucket #3 will have 14 years of long term growth before being poured back into bucket #1

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Buckets of Money Bucket #1 $3,500 per month for 7 yrs 91% Income Tax Free Deposit $268,965 7 Year Certain Immediate annuity More income with inflation hedge. $233,562 grows to $307,352 in 7 years at an average rate of 4.00%. This will pay you $4,000 per month for 7 more years when bucket #1 is empty. Long term growth – bucket #3 not needed for 14 years. $197,473 goes into bucket #3 and in 15 years grow to $500,000 @ 6.38% Bucket #3 Longer Term Bucket #2 Intermediate Term Not needed until bucket #1 is empty

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Buckets of Money A smart, yet conservative, way to protect-and grow- your nest egg

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Unit Four Savings & Investments Pages 43-57.

Unit Four Savings & Investments Pages 43-57.

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